Outsourcing is now increasingly gaining ground, it appears most of the industry agrees on that and extensively confirm that outsourcing is a valuable strategy for firms to lower operational costs, increase efficiency and flexibility, and allow businesses to let go of non-core tasks and better focus on more strategic, high-value activities, taking advantage of access to state-of-the-art technology to further innovate and grow.

Objectway surveyed professionals among banking and wealth management to investigate recent outsourcing trends, how they are currently shaping the industry and reveal the ultimate, key benefits.

Reasons why

The main reasons that our respondents make strong use of outsourced IT are because of a lack of internal resources (29%) and to gain the ability to access world-class capabilities (26%). Indeed, the combination of specialisation and expertise offered by world-class providers who invest in technology, methodologies and people, gives them a competitive advantage and helps customers to avoid the cost of cutting-edge technology and training.

Speed to market (17%), cost reduction (17%) and flexibility (11%) are also deeply looked into when deciding whether to outsource or not, but the access to specialised resources and latest technology is considered fundamental.

Delving into the market, we see the majority of firms (43%) is looking for IT Outsourcing, covering infrastructure, software development and application management. Within the industry, 22% is particularly interested in Business Process Outsourcing to better handle certain tasks – help desk and customer service calls for example – improve productivity, customer satisfaction and team morale.

For the extreme relevance outsourcing has for your firm, it is essential to select the right provider. Competencies, experience (22%) and commitment to quality (22%) are the top key factors evaluated. Still, 20% of professionals surveyed selected price as a differentiating element. A cheap price may attract, but we reckon that it pays to compare and find out what providers effectively offer and how they distinguish themselves from the competition.

In addition, the one-stop shop model has its own niche (13%). It means providing convenience and efficiency to clients in order to gain loyalty as well as increase revenue.

Expertise or strategic thinking?

The key skills required to gain real strategic value from third-party relationships are identified as deep subject matter expertise (26%) and technical skills (21%), together with strategic thinking (21%). The real advantage of outsourcing is to use it as a tool to drive strategic value and transform businesses as a catalyst for change. So, forget what you think you know about outsourcing and rely on the expertise your outsourced service provider offers in terms of skills that your business lacks.

On the other hand, providers must ensure they have the right offering to meet banks and wealth managers demands and do their homework on the fulfilment of regulatory requirements and ESG considerations.

Challenges: Regulatory compliance and organisation resistance

According to our respondents, the main challenges for existing outsourcing relationships are ensuring ongoing regulatory compliance (29%) and defining provider responsibilities (21%).

Internal organisational resistance (14%) also present challenges; one way that business managers can attempt to reduce resistance to outsourcing is by educating employees about the benefits of outsourcing.

Among benefits, focusing on the core business (28%) and gaining access to skilled resources (25%) are highly valued, while cost advantages (10%), increased efficiency (12%) and reduced risk (12%) are all factors the industry is already familiar with and do not come as a surprise, but rather a further confirmation.

We often think about outsourcing purely in terms of cost savings, but it is mainly a catalyst for digital transformation through the access it gives to innovation and the latest technology. As the business grows, outsourcing can be a way to promote innovation, disrupt your industry, and access new skill sets that can reposition the firm in the market.

Download the Survey Report and discover all the key findings!